Correlation Between Odyssey Semiconductor and STMicroelectronics

Can any of the company-specific risk be diversified away by investing in both Odyssey Semiconductor and STMicroelectronics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Odyssey Semiconductor and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Odyssey Semiconductor Technologies and STMicroelectronics NV, you can compare the effects of market volatilities on Odyssey Semiconductor and STMicroelectronics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Odyssey Semiconductor with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odyssey Semiconductor and STMicroelectronics.

Diversification Opportunities for Odyssey Semiconductor and STMicroelectronics

-0.61

Correlation Coefficient

Odyssey Semiconductor  STMicroelectronics

Excellent diversification

The 3 months correlation between Odyssey and STMicroelectronics is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Odyssey Semiconductor Technolo and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Odyssey Semiconductor is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Odyssey Semiconductor Technologies are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Odyssey Semiconductor i.e., Odyssey Semiconductor and STMicroelectronics go up and down completely randomly.

Pair Corralation between Odyssey Semiconductor and STMicroelectronics

Given the investment horizon of 90 days Odyssey Semiconductor Technologies is expected to generate 7.73 times more return on investment than STMicroelectronics. However, Odyssey Semiconductor is 7.73 times more volatile than STMicroelectronics NV. It trades about 0.1 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.02 per unit of risk. If you would invest  2.56  in Odyssey Semiconductor Technologies on September 24, 2024 and sell it today you would lose (0.56) from holding Odyssey Semiconductor Technologies or give up 21.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Odyssey Semiconductor Technolo  vs.  STMicroelectronics NV

Odyssey Semiconductor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Odyssey Semiconductor Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward indicators, Odyssey Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Odyssey Semiconductor and STMicroelectronics

The main advantage of trading using opposite Odyssey Semiconductor and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odyssey Semiconductor position performs unexpectedly, STMicroelectronics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.

The idea behind Odyssey Semiconductor Technologies and STMicroelectronics NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.